Open bracket order with MIS leverage , bothside stop n target , facility we expect not leverage
@nithin. Is there a chance that brokers, or Zerodha to be specific will charge lesser exposure margins in F & O post August 2021 or Dec 2020 and the overall margin may reduce. Just a thought or is this also mandated by SEBI?
Not possible, exposure is also mandated by regulators.
Leverage is the DRUG of the trading market, and SEBI is trying to curb it for reducing the volatility and getting stability. Side effect would be reduction in liquidity, price discovery and lack of credit in the market.
Objective is to suffer less erratic price fluctuations at daily level, and spread the fluctuation at weekly levels. This will bring confidence in long term investors, who are afraid to dip their wallets into the market. In a longer term, SEBI is planning to woo the fundamental traders, rather than technical & quantitative guys. Policy writing is a tricky business, and SEBI P writers are having a field day.
Wont this move have considerable impact on volatility spreads in Options trading?
1 Like
New Sebi circular says flat 20% can be charged by the brokers however margin that will be collected by the exchange from brokers will remain to be SAME (VAR+ELM) For CASH segment (Equity).
So equity intraday leverage will be 5X irrespective of the volatility of the stock?
Also var+elm collection from brokers postponed till sept 1,2020.
Will zerodha provide 5x in equity hereafter?
No breakthrough in derivatives as far now I think.
Perfectly put
Yes, if var+elm is lower than 20% then leverage can be more than 5 times for cash.
Hi Siva,
The postponement of rules to Sept 1st is for delivery based trades right ? This is mostly applicable to traditional brokers who took delivery based trades, without upfront margin from the client. This was never problem for new gen online brokers like Zerodha, as for delivery based trades, we always paid full money upfront.
For intra-day trades , the rules will start from Dec 1 in phased manner as per SEBI circular and by the end of Aug 2021, for intra-day broker has to collect upfront margin from client. During the phased implementation funding has to come from brokers own fund.
Reference : SEBI/HO/MRD2/DCAP/CIR/P/2020/127
https://www.sebi.gov.in/legal/circulars/jul-2020/framework-to-enable-verification-of-upfront-collection-of-margins-from-clients-in-cash-and-derivatives-segments_47101.html
Snippets from above circular
"The provisions of this Circular shall come into effect from December 01, 2020. "
" Further, during the aforesaid period of phased adoption, the member should be able to demonstrate that the balance peak margin obligation (i.e., [peak margin obligation of the client across the snapshots] minus [25%/ 50%/ 75% of Peak margin obligation of the client across the snapshots]) has been funded from the member’s own funds and not from any other client."
While all brokers will have to collect this VAR+ELM compulsory before a trade even now, penalties for non-collection will kick in from Dec 2020 in a phased manner.
I don’t get it, the above says the VAR+ELM is compulsory even now, this implies every brokerage is either breaking the rules till now as it attracts no penalty but as suggested above the intraday leverages would be reduced fron 1 august only?
It was grey area, which SEBI made black and white with this new changes.
Not from August 1st, implementation has been postponed until September 1st.
its not fully going …5 times remains always
@ShubhS9 @siva @nithin
Any Hope That 5x Leverage Can increase to 10x in cash segment Or 5x Leverage Has been finalized across the board
Siva already answered a similar question above.
Means If Stock Var+Elm Is less than 20% Then Broker can give you More then 5x 8x 10x Leverage in cash segment for intraday @ShubhS9
Yes, If any stock has VAR + ELM of 10%, then leverage can be 10x.
1 Like
Seeing all these rules, going for a T+0 settlement in cash markets is my opinion. Zerodha is already doing this on the client end. @nithin your opinion on this and had this been discussed in the meetings?
So why are the reducing the leverages for say reliance to 4.5x from September itself, why it is not reduced in a phased manner (say reliance with var+elm is 22%) it should be 18x -> 9x -> 6x -> 4.5x till august 21, or is it just Zerodha who have decided to take up the whole margin from sept itself but other brokerages might follow the phased manner?
1 Like
It will be norm with all brokers from sep1st.